Tag Archives: ACA

What if You Discovered That Your Digital Dollar Netted You a Dime’s Worth of Digital Media?

12 Feb

dreamstime_xs_2601647In 2014, the World Federation of Advertisers conducted a study which demonstrated that “only fifty-four cents of every media dollar in programmatic digital media buying” goes to the publisher, with the balance being divvied up by agency trading desks, DSPs and ad networks.

Fast forward to the spring of 2016 and a study by Technology Business Research (TBR) suggested that “only 40% of digital buys are going to working media.” TBR reported that 29% went to fund agency services and 31% to cover the cost of technology used to process those buys.

Where does the money go? For programmatic digital media, the advertiser’s dollar is spread across the following agents and platforms:

  • Agency campaign management fees
  • Technology fees (DMP, DSP, Adserving)
  • Data/Audience Targeting fees
  • Ad blocking pre/post
  • Verification (target delivery, ad fraud, brand safety)
  • Pre-bid & post-bid evaluation fees

It should be noted that the fees paid to the above providers are exclusive of fees and mark-ups added by SSPs, exchanges or publishers that are blind to both ad agencies and advertisers. What? That is correct. Given the complex nature of the digital ecosystem, impression level costs can be easily camouflaged by DSPs and SSPs. Thus, most advertisers (and their agencies) do not have a line-of-sight into true working media levels…even if they employ a cost-disclosed programmatic buying model (which is rare).

Take for example the fact that a large preponderance of programmatic digital media is placed on a real-time bidding or RTB basis, and a majority of that, is executed using a second-price auction methodology. With second-price auctions, the portion of the transaction that occurs between a buyer’s bid and when the clearing price is executed without advertiser or agency visibility, thus allowing exchanges to apply clearing or bid management fees and mark-ups as they see fit. So for example, if two advertisers place a bid for inventory, one at $20 per thousand and the other at $15 per thousand, the advertiser who placed the higher bid of $20 would win, but the “sale price” would be only one-cent more than the next highest bid, or $15.01. However, advertisers are charged the “cleared price,” (could be as high as $20 in this example) which is determined after the exchange applies clearing or bid management fees. How much you ask? Only the exchanges know and this is information not readily shared.

Earlier this month Digiday ran an article entitled, “We Go Straight to the Publisher: Advertisers Beware of SSPs Arbitraging Media” which profiled a practice used by supply-side platforms (SSPs) that “misrepresent themselves.” How? By “reselling inventory and misstating which publishers they represent.” The net effect of this practice allow the exchanges an opportunity to “repackage and resell inventory” that they don’t actually have access to for publishers that they don’t have a relationship with.

Let’s look beyond programmatic digital media. Consider the findings from a Morgan Stanley analyst, reported in a New York Times article in early 2016 that stated that, “In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook.” What is significant here is that until very recently, these two entities have self-reported their performance, failing to embrace independent, industry accredited resources to verify their audience delivery numbers.  

The pitfalls of publisher self-reporting came to light this past fall when Facebook was found to have vastly overstated video viewing metric to advertisers for a period of two years between 60% and 80%.  

By the time one factors in the impact of fraud and non-human viewing, and or inventory that doesn’t adhere to digital media buying guidelines and viewability standards, it’s easy to understand the real risk to advertisers and the further dilution of their digital working media investment.

Advertisers have every right to wonder what exactly is going on with their digital media spend, why the process is so opaque and why the pace of industry progress to remedy these concerns has seemingly been so slow. Sadly, in spite of the leadership efforts of the Association of National Advertisers (ANA), The World Federation of Advertisers (WFA), The ISBA, The Association of Canadian Advertisers and the Interactive Advertising Bureau (IAB) there is still much work to be done.

The question that we have continually raised is, “With advertisers continuing to allocate an ever increasing level of their media share-of-wallet to digital, where is the impetus for change?” After all, in spite of all of the known risks and the lack of transparency, the inflow of ad dollars has been nothing short of spectacular. According to eMarketer, digital media spend in the U.S. alone for 2016 eclipsed $72 billion and accounted for 37% of total media spending.

There are steps that advertisers can take to both safeguard and optimize their digital media investment. Interested in learn more? Contact Cliff Campeau, Principal of AARM | Advertising Audit & Risk Management at ccampeau@aarmusa.com for a complimentary consultation. After all, as Warren Buffett once said:

“Risk comes from not knowing what you’re doing.”

Will Transparency Concerns Undermine Trust?

17 Mar

transparencyAt the 2014 ANA “Agency Financial Management” conference, representatives from the Association of National Advertisers, Association of Canadian Advertisers and the World Federation of Advertisers each presented member survey results which indicated that their advertisers were concerned about the lack of transparency which existed into the financial stewardship of their advertising funds.

In their February, 2014 study, the ANA found that forty-six percent of the members’ surveyed expressed specific concern over the “transparency of media buys.” As contract compliance auditors, we know from our dealings that the resulting lack of clarity and in some instances, honesty surrounding issues such as data integrity, audience delivery, trading desks, reporting and financial reconciliations creates financial risks for advertisers. Sadly, the lack of transparency ultimately can serve to undermine attempts to improve trust levels between clients, agencies and media sellers. 

Fast forward one-year and two events come to light, which raise serious issues regarding trust.

The first was a speech made by Jon Mandel, former CEO of WPP’s Mediacom unit at the ANA’s “Media Leadership Conference” in early March, where he alleged the widespread use of volume based rebates or kickbacks from media sellers to agencies. He suggested that these practices, which have the potential to negatively affect advertisers, had migrated from cash advances to no-charge media weight which an agency can then deal back to clients or liquidate in barter deals. Mr. Mandel specifically stated that media agencies “…are not transparent about their actions. They recommend or implement media that is off strategy or off target if it works for their financial gain.”

The second event, which coincidentally involves Mr. Mandel’s former employer, Mediacom, deals with revelations regarding the use of “value banks” and the falsifying of media campaign reports by its Australia operation. For those not familiar with the term value bank, this is where media sellers provide a certain level of no-charge media weight to agencies based upon their aggregate client spending with that entity.

In a story which broke in Mumbarella, a media news website, it was reported that media “discrepancies” were found in late 2014 in an audit of Mediacom. The audit, conducted by EY was actually commissioned by Mediacom once it had learned of the problems. Among the findings of EY’s investigation were that Mediacom personnel had “altered the original demographic audience targets to make it appear as though the campaigns had reached the official OzTam audience ratings numbers.” Further, the review found that the agency had been taking “free or heavily discounted advertising time given to it by TV stations” and selling it back to its clients in violation of its parent company’s (GroupM) policy.

While Mediacom terminated several of the employees allegedly involved in these matters and pro-actively engaged an auditor, it should be noted that the audit found that the aforementioned fraud had been taking place undetected for a period of “at least two years.” This certainly raises questions regarding the efficacy of the controls that were in place at the agency to safeguard advertiser funds. The combination of lax controls and limited transparency had a negative financial impact on some of the agency’s largest clients (i.e. Yum! Brands, IAG, Foxtel).

As an aside, following Mr. Mandel’s comments to the ANA conference attendees, Rob Norman, Chief Digital Officer at WPP’s GroupM stated that; “In the U.S., rebates or other forms of hidden revenue are not part of GroupM’s trading relationships with vendors.” Sadly, in light of both Mr. Mandel’s revelations and the Mediacom Australia situation U.S. advertisers will likely take little solace in these reassurances from WPP. Worse, given the levels of advertiser concern about the lack of transparency within the industry, there is a high likelihood that other agencies will be painted by the same broad brush and assumed to be engaged in similar practices… whether they are or aren’t.

For an established industry with estimated 2014 global ad expenditures of $521.6 billion (source: MAGNA GLOBAL) it is amazing that some of the aforementioned practices would take place and that the industry would continue to deny rather than acknowledge their existence in an overt manner. Unchecked, the murky dealings of some media owners and a handful of agencies may ultimately push trust, not transparency to the fore of advertiser concerns and that is not a healthy dynamic when it comes to client/ agency relationships. The words of American humorist and journalist Kin Hubbard may serve to synthesize the crux of the issue:

“The hardest thing is to take less when you can get more.”

Interested in learning how you can improve your transparency into the financial management of your organizations marketing investment? Contact Cliff Campeau, Principal at Advertising Audit & Risk Management at ccampeau@aarmusa.com.

 

 

 

 

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